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Bank Secrecy Act: Joint Statement on Due Diligence Requirements for Customers Who May Be Considered Politically Exposed Persons

BSA/AML, OFAC and Fraud
August 21, 2020

Summary:

The FDIC, the Board of Governors of the Federal Reserve System, the National Credit Union Administration, the Office of the Comptroller of the Currency, and the Treasury Department’s Financial Crimes Enforcement Network (FinCEN) are issuing a joint statement on Bank Secrecy Act due diligence requirements for customers whom banks may consider to be politically exposed persons (PEPs). The term PEPs is commonly used in the financial industry to refer to foreign individuals who are or have been entrusted with a prominent public function, as well as their immediate family members and close associates. The statement clarifies that, while banks must adopt appropriate risk-based procedures for conducting customer due diligence (CDD), the CDD rule does not create a regulatory requirement, and there is no supervisory expectation for banks to have unique, additional due diligence steps for customers who are considered PEPs.

A copy of the Joint Statement can be found on the FDIC’s website.

Statement of Applicability to Institutions: This Financial Institution Letter (FIL) applies to FDIC-supervised banks and savings associations.

Highlights:

  • The FDIC, along with the other federal banking agencies and FinCEN, is issuing this joint statement in response to requests from banks on how to apply a risk-based approach to customers who may be considered PEPs consistent with CDD requirements.
  • All bank customers, including those whom banks consider to be PEPs, are subject to Bank Secrecy Act/anti-money laundering (BSA/AML) regulatory requirements such as suspicious activity reporting, customer identification, CDD, and beneficial ownership requirements for legal entity customers.
  • Banks must adopt appropriate risk-based procedures for conducting CDD for all customer types. More specifically, banks must adopt appropriate risk-based procedures for conducting CDD that, among other things, enable banks to: understand the nature and purpose of customer relationships for the purpose of developing a customer risk profile; conduct ongoing monitoring to identify and report suspicious transactions; and, on a risk basis, to maintain and update customer information.
  • Under the CDD rule, there is no regulatory requirement nor is there a supervisory expectation, for banks to have unique, additional due diligence steps for PEPs.
  • The Guidance on Enhanced Scrutiny for Transactions that May Involve the Proceeds of Foreign Corruption (January 2001) is rescinded.

Distribution:

FDIC-Supervised Institutions

Suggested Routing:

Chief Executive Officer
BSA Compliance Officer

Attachment(s)

Last Updated: August 21, 2020